Berlin gives Nasdaq foothold in Germany

NO ONE would say that launching a stock exchange is easy. But many who have tried discover that the long hours spent securing regulatory approvals and building systems turn out to be the easy part. Getting people to use the facility is the tougher challenge.

Nasdaq Europe is today seeking to address this in a ground-breaking deal with the Berlin Stock Exchange, under which each market takes a 10% stake in the other and gives its members access to the other's listed securities.

Nasdaq Europe hopes this will open up Germany for it. It will bring to the Exchange several German market specialists and, to the extent that they make markets in Nasdaq stocks, it will significantly increase the liquidity and narrow the spreads in those stocks - making them more attractive to issuers and investors. The plan is to turn the vicious circle that sank Easdaq - a Brussels-based exchange in which no one buys shares because there is nothing to buy - into a virtuous circle in which expanding numbers of participants improve liquidity and attract more business, further improving liquidity.

The attraction to Berlin is that it keeps it in the game. Overshadowed by Frankfurt, it has carved out a niche by listing thousands of non-German stocks, but it is still relatively small. This deal gives it access to advanced technology and gives its participants a potentially bigger pool in which to operate.

On paper, it looks a winner but history proves more alliances fail than succeed. The key to this one, apart from continued goodwill on both sides, is for German investors, badly burnt by the tech stocks crash, to recover their appetite for equities. Currently only 18% own shares, and they are the biggest and richest country in Europe. It will be a tough fight, but it is certainly a prize worth playing for.

Logging on and paying dear for Christmas WITH Christmas fast approaching, technology buffs are predicting that many more people than last year will spend the 12 days trying to do some internet shopping - though, of course, the overall total may include some diehards still trying to log on from last year. Rude comments aside, if expert forecasts of £2bn sales actually come through, it will signify a sixfold increase on last year.

The way internet shopping has changed is interesting. When it started we were told it would be so much cheaper than conventional retailing that it would put shops out of business. We were told it would become second nature to shop around for the cheapest offer and either buy direct or tell the local retailer he had to match the price.

It's a different story now. Internet retailing no longer claims to be the cheapest. Goldfish, the credit card company, sponsors an equivalent to the Retail Prices Index for goods available on the internet. For months it has been reporting that prices have been rising faster than inflation. Latest figures out this week show a 12-month rise of 5.3% - twice as much as goods have risen in the shops. Within that overall total, some seasonally-popular items have risen even more.

Websites have belatedly discovered what any old-fashioned snail mail order firm could have told them before they started - it costs money to develop warehouse systems, stock controls and delivery channels.

Their low prices were losing them money. Their solution therefore has been to put their prices up and position themselves not as the cheapest way to shop, but as the most convenient. Few suppliers are prepared yet to charge aggressively for that convenience but they are heading in that direction. By next Christmas paying more to shop on the web will be the norm.

Brown's pensions blow

GORDON Brown delivers his autumn Pre-Budget Report in just two weeks and already the briefing has started. The difficult economic situation makes it unlikely that there will be radical new taxes. Or even small new commitments. The emphasis will be on demonstrating once again that he is a business-friendly Chancellor.

It is ironic that he will be making such a speech just as the pernicious long-term effects on business of one of his earliest measures are becoming clear. In his first year Brown increased the tax on dividends collected by pension funds, drastically reducing their investment income. For a while, when share prices and dividends were rising strongly, it seemed a painless way to raise hundreds of millions in extra taxes. But with the stock market in decline and dividends being slashed, it becomes daily more obvious that his stealth tax has created a gaping hole in the heart of many occupational pension funds.

Business will have to bridge that gap if it can, but the sums in some cases are huge. Last week, for example, British Telecom said its scheme was theoretically £4bn in deficit. It is by no means alone. Finding the money to make good the pension fund liabilities is one of the major challenges facing finance directors in the next 12 months.

At best it will add to payroll costs and reduce profits; at worst it will send some companies to the wall. In between, a whole raft of companies will buy bonds rather than equities to reduce risk, and possibly close their direct benefit schemes to new members. The result, broadly, will be a degradation in the quality of pensions provided by employers in this country - an odd achievement for a Labour Chancellor.